You probably read something about it earlier this week, but in the least surprising news, all 12 players extended qualifying offers by their clubs declined the offers and will enter the free agent market.
A quick primer: prior to the collective bargaining agreement signed signed before the 2012 season, instead of qualifying offers baseball had that weird Type A and Type B free agent class. Type A free agents were determined to be within the top 20 percent of all players over the past two seasons. If a team signed a Type A free agent that had been offered arbitration, that team had to forfeit its top draft pick and a supplemental draft pick. If a team signed a Type B free agent (the next 20 percent over the past two years), they only sacrificed the supplemental pick.
Now, MLB uses qualifying offers. The only way teams are able to get draft picks in return for one of its players signing elsewhere is to offer that player a qualifying offer. Assuming he rejects the offer and signs elsewhere, draft pick compensation is doled out.
The qualifying offer amount differs each year (basically has gotten more expensive) because it has to at least equal the average of the 125 richest contracts in baseball. After this season, that one-year deal is worth $15.3 million. In 2012 it was worth $13.3 million and in 2013 it was $14.1 million.
So back to the matter at hand. Why is the qualifying offer system broken? It is relatively new after all and might need time to adjust. But so far, after three seasons, 34 players have received qualifying offers and 34 players have rejected qualifying offers. Qualifying offers sit at a .000/.000/.000 line.
On the players end, it makes sense to reject a qualifying offer. Almost to a certain extent, the qualifying offer is a slap in the face of sort. You aren't necessarily being given the contract because the team wants you to stay around. You are being offered the contract because the team wants to reap some sort of benefit if you happen to leave. Ubaldo Jimenez, rejected a qualifying offer because he felt he deserved to be paid for what he had done and what he could do. Most importantly, he wanted job security.
Or at the very least, I wasn't as much worried about the annual salary, I was more concerned with having the long-term security.
You can't blame Jimenez there. These players, although they make boat loads of money, are still normal people at heart. Having money coming in every year is an easier burden to bear than trying to build a budget and figure out what to do in the post-baseball afterlife. Job security, for the most part, appears to be one of the larger reasons for why players reject qualifying offers.
In 2012, only one player who rejected a qualifying offer took a one-year deal after. In 2013, for the players, the system got a bit more grave. We all read about how well it worked out for Nelson Cruz (one-year, $8 million), Stephen Drew (one-year, $9.5 million), Kendrys Morales (one-year, $12 million prorated) and Ervin Santana (one-year, $14.1 million). Each of those players felt they were worth more than the offer they received. Each of those players struggled to find employment, because each team that signed them would be forced to give up its top pick.
As Dave Cameron pointed out, the general consensus in the baseball community is that draft picks are worth approximately three times their slot value on the open market. So a $2 million slot equates to about $6 million. Tim Bierkes at MLBTradeRumors did a great job of detailing the slot cost for each team. Last season, the cost of signing Morales in 2014 added anywhere from $4.5 million to $8.25 million to the cost of his contract.
This seems to be a theme that will continue. As salaries continue to rise across the league, being able to secure solid, low-cost players through the draft becomes even more important -- especially for the smaller market teams. Those teams will be less willing to part with the draft pick to sign a player like Melky Cabrera, Victor Martinez or Hanley Ramirez.
Instead, we will most likely see more of what happened in 2013, when the Yankees swooped in and cleaned everyone up. The Yankees signed three players who rejected their 2013 qualifying offers -- Jacoby Ellsbury, Brian McCann and Carlos Beltran. With each additional player signed, the Yankees gave up a later round draft pick. For the Yankees, the cost-detriment to signing those players was less each time.
The players union accepted the collective bargaining agreement, so they dug their own graves with this one. The current CBA is still in session for two more years, but it wouldn't be surprising to see some attention placed on qualifying offers in the upcoming talks.